Britain will suffer its first full year of recession since 1991 next year as the global economy enters a "major downturn" triggered by the most dangerous financial shock since the 1930s, the IMF said today.

In a sombre half-yearly health-check of the international economy, the International Monetary Fund slashed its growth forecasts for the UK for 2009 from 1.7% to -0.1% – more sharply than for any other major economy.

The IMF said the risk was that the recession in the UK would be even deeper than it is currently forecasting.

Overall, the IMF said the world economy would grow by just 3% in 2009, largely due to the strength of the two big developing Asian economies, China and India, which are forecast to expand by 9.3% and 6.9% respectively.

"The major advanced economies are already in, or close to recession, and although a recovery is projected in 2009, the pickup is likely to be unusually gradual, held back by continued financial market deleveraging," the IMF said in its World Economic Outlook, released as finance ministers from around the world prepare to gather in Washington this weekend to discuss the crisis.

"The financial crisis that first erupted with the US sub-prime mortgage collapse in 2007 has deepened further in the past six months, and entered a tumultuous new phase in September," the fund warned.

"The impact has been felt across the global financial system, including in emerging markets to an increasing extent. Intensifying solvency concerns have led to emergency resolutions of major US and European financial institutions, and have badly shaken confidence."

Of the developed economies, the US is expected to flirt with an outright recession in 2009, growing by a sickly 0.1%, while the world's second-biggest economy, Japan, should see 0.5% growth, with Germany stagnating, the fund said.

The fund singled out the UK, together with Ireland and Spain, as especially vulnerable to a housing market crash, saying it has experienced a larger "unexplained" increase in house prices over the past decade. It added that the Treasury is entering the downturn with the public finances in a weaker state than at the time of the dotcom collapse, leaving Alistair Darling less scope to use fiscal policy to prop up the economy.

Analysing the causes of the financial crisis, the fund said "lax macroeconomic and regulatory policies" had allowed the world economy to grow faster than its "speed limit", for several years, allowing bubbles to build up in stockmarkets, house prices and commodities.

It called for central banks to be allowed to take into account the risk of financial instability in their monetary policy decisions, and lean against the wind" to prevent unsustainable booms from emerging in future.